The stock closed at 438,500 yen, the lowest level since
Nov. 28, a week after the bourses said they would merge. Volume
was 77 percent below the five-day average, according to data
compiled by Bloomberg. The 480,000 yen-a-share tender, which
began July 11, closes at 3:30 p.m. local time today, according
to the Tokyo bourse, which needs more than 50 percent of shares
to proceed. The results will be announced tomorrow.

Merging Japan’s biggest stock venues is the first step in a
government plan for creating a “comprehensive” exchange
handling equities, commodities and other securities as the
country seeks to re-establish itself as a financial center.
While regulators have scuttled more than $30 billion in global
exchange mergers since 2010, Japan’s Fair Trade Commission
approved the deal July 5.

“We did tender our shares,” said Robert Lynch, a New
York-based director of research at Westchester Capital
Management Inc., which holds about 4,500 share in the Osaka
company. “Given the level we had bought it at and the return we
were going to realize, it was a reasonable exit for us. There
was a case for improved terms but ultimately we decided to
accept it. I think there will be some that will hold out but
they’ll probably be able to get the 50 percent.”

Naoya Takahashi, a spokesman for the Tokyo bourse operator,
declined to comment on the progress of the tender. Osaka
spokesman Masahiro Yada wouldn’t comment on the bid or the share
price, which has declined 5.2 percent this month.

Selling Out

“People may have sold their shares on expectations the
tender will succeed and the offer price won’t be raised,” said
Hiroshi Torii, an analyst at Deutsche Bank AG.

Declines in the price and trading of the shares reflect the
approach of the tender deadline, according to Peter Lenardos, an
exchange analyst at RBC Capital Markets in London.

Investors intending to sell stock to Tokyo “will have
already bought it because if you buy today the stock won’t
settle in time,” he said. “As we approach the end of the
tender period investors are beginning to look through it. The
deal has been approved. Now what’s next?”

Holding Out

Jupiter Asset Management Ltd., which owns about 1.1 percent
of OSE, said July 26 that shareholders deserve a higher price
because Osaka is more profitable than Tokyo. JO Hambro Capital
Management Ltd., the third-largest shareholder, won’t tender its
5.1 percent stake because it wants to own a piece of the merged
exchange, Nudgem Richyal, a Singapore-based portfolio manager at
JO Hambro, said on July 10.

“The takeover bid will be one of the most symbolic events
for Japan in taking a step towards becoming Asia’s financial
hub,” said Ayako Sera, a market strategist at Sumitomo Mitsui
Trust Bank Ltd., which has 33 trillion yen ($416 billion) in
assets. “If this doesn’t kick-start well, there’s a danger it
will lead to Tokyo’s decline.”

The transaction has two steps, with TSE first bidding for
between 50 percent and 67 percent of Osaka in the tender offer.
Should that succeed, owners will then vote to complete the
merger via a share swap that values TSE at 1.7 times Osaka. The
companies project the deal will close in January.

The country’s Financial Services Agency was involved in
discussions between TSE and Osaka before the deal was announced,
two people with direct knowledge of the talks said in March.